The 10-year Treasury and what it means for your refinancing
With Treasury yields fluctuating, timing your rate lock has never mattered more. Here's our framework for evaluating fixed vs. floating rate decisions in the current environment.
The 10-year Treasury yield has been anything but stable this year, swinging in a range that has made rate-lock timing one of the most consequential decisions in commercial real estate finance. For borrowers with loans maturing or assets being acquired in this environment, understanding how to navigate this volatility is critical.
Most permanent commercial real estate loans are priced as a spread over the 10-year Treasury (for fixed-rate) or SOFR (for floating-rate). When Treasury yields move 50 basis points, your all-in rate moves with it — and on a $15 million loan, that's roughly $75,000 in additional annual interest.
Our framework for borrowers in this environment centers on three questions. First, what is your hold horizon? If you plan to own the asset for 7+ years, locking a fixed rate removes interest rate risk from your underwriting and gives you certainty of cash flow. If your hold is shorter or your strategy is transitional, a floating-rate bridge loan may offer lower initial carry and flexibility.
Second, what is your refinance timeline? If you're 12 to 18 months out, consider a forward rate lock. Many life companies and CMBS conduits offer forward commitments that lock today's rate for a loan funding 6 to 12 months in the future. The cost is typically 25 to 50 basis points, but the protection can be well worth it if rates rise.
Third, can you tolerate payment volatility? Floating-rate loans start lower but can increase rapidly. We've seen borrowers caught off guard by rate caps that proved insufficient when SOFR moved 200 basis points faster than expected. If you go floating, ensure your rate cap is sized for a realistic worst case, not just the base case.
The bottom line: don't let rate movements paralyze your decision-making. Build a financing strategy that accounts for where rates are, where they could go, and what your specific transaction requires. Then execute — because waiting for the perfect rate often costs more than locking a good one.
YOUR NEXT TRANSACTION DESERVES INSTITUTIONAL EXECUTION.
Whether you're acquiring, constructing, refinancing, or restructuring — we're ready to engineer the capital solution your deal requires.
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